Risk sentiment recovered modestly on Monday as Wall Street rebounded and oil prices eased from recent highs, with the S&P 500 closing up 0.70% and the Nasdaq gaining 0.82% on renewed AI optimism following Anthropic's S-1 IPO filing. Central banks dominate the week ahead, with the Fed, ECB, and Bank of Japan all expected to hold rates steady amid persistent inflation pressures driven by elevated energy costs, while the Bank of Canada and RBNZ are priced for 25 basis point hikes. Geopolitical risk remains embedded in energy markets, with Houthi attacks on Saudi oil infrastructure keeping a war premium in Brent crude despite Monday's partial pullback, and gold holding firmly above $4,000/oz as a safe-haven anchor. The VIX fell 5.45% to 18.39, signalling a measured improvement in US risk appetite, though the Nikkei VIX surged 6.34% to 38.25, highlighting residual anxiety in Asian markets.
For Asia-Pacific markets opening Tuesday, the constructive US close and easing oil prices provide a modest tailwind, but the backdrop remains complex. Rising US 10-year Treasury yields — now at exactly 5.00%, up 4 basis points — continue to weigh on rate-sensitive sectors and the AUD, which sits near flat at $0.7019. RBA hike odds above 60% for the next meeting add a domestic tightening overlay that is pressuring Australian banks and consumer-facing stocks, while the Communist Party's fifth plenum in Beijing introduces event risk for iron ore and bulk commodity demand sentiment. ASX Materials and Energy sectors drew support in the prior session, but Information Technology and Consumer Discretionary remained under pressure, a rotation dynamic likely to persist given the global macro backdrop.